The real risks behind South Africa’s social grant payment crisis

The dispute hovering over South Africa’s social grant system and threatening millions of vulnerable beneficiaries with nonpayment creates risks that go far beyond interrupting poor people’s access to desperately needed grants.

The failure of the South African Social Security Agency (Sassa), which is responsible for the payment and administration of social grants, to act timeously has created a crisis that threatens to deliver grant recipients on a silver platter into the hands of unscrupulous financial services companies.

The latest instalment in the bizarre saga came last week. Sassa officials announced that they would file papers with the Constitutional Court proposing that their invalid contract with Cash Paymaster Services (CPS), which holds the contract for grant distribution, should be extended for another year.

This contract was awarded to CPS in a controversial tender in 2012. It was declared invalid two years ago by the constitutional court, which instructed Sassa to reissue the tender. As the deadline came closer civil rights groups such as Black Sash started sounding warning bells that Sassa was not implementing the court’s orders.

Deadline after deadline passed, and by end the end of 2016 it was clear that Sassa had utterly failed to act on the court’s instructions. Late last week it appeared that Sassa had missed another one. It didn’t make its planned eleventh-hour submission.

This means that there is no credible arrangement in place to ensure that social grants will be paid when the court’s deadline expires on 31 March. The social grant system supports about 17 million individuals. Disrupting the payments will cause huge suffering to the country’s poorest and most vulnerable people and is likely to lead to social unrest.

With last week’s announcement, it seems that Sassa officials intended simply to present the constitutional court and the National Treasury with an impossible situation: condone an illegal contract, or face the possibility of social and political chaos.

But there’s even more at stake. If the court allows a further extension of the invalid contract (or approves a new contract with CPS), Sassa will have perpetuated a situation in which the accounts of grant recipients have in effect become mere conduits between the South African fiscus and the private financial empire that has taken shape around grant disbursement.

More than just a contract is at stake

At the centre of the storm is CPS, a subsidiary of Net1 UEPS Technologies which is a listed global financial services and logistics group with operations in a number of countries including South Africa, India and Tanzania.

Net1 owns the fingerprint-based biometric identification and payment system that is central to CPS’s operations. Their proprietary Universal Electronic Payments System technology forms the “back end” of the Sassa smart card CPS uses in the electronic payment of grants. It is access to this system that has enabled CPS to roll out payments to the whole country.

While convenient for CPS, scholar Keith Breckenridge has pointed out that this creates an unprecedented situation – grant beneficiaries are captured within a private technological and financial network owned and controlled, not by Sassa, but by its service provider.

Here it should be noted that the work of CPS is only part of a bigger corporate strategy. Also part of Net1’s global empire are financial services companies like MoneyLine, EasyPay, Manje Mobile Solutions, Smart Life and others. These companies act in concert to make use of the opportunities afforded by CPS’s control of the payment network.

Millions of grants beneficiaries, for example, have not only been provided with a Sassa account; their accounts have also been linked to EasyPay Everywhere, a bank account operated by MoneyLine and CPS’s banking partner, Grindrod Bank. All this is part of an explicit two-stage strategy on the part of Net1: a first wave in which it rolls out its technological infrastructure, and a second wave in which it uses this infrastructure to market a wide array of products and services to an essentially captive customer base.

The net effect is that social grant recipients are now tied up in a web of dependency on financial services companies controlled by Net1.

What this means for financial inclusion

This creates two problems. Firstly, this arrangement may be in violation of competition law. It looks as if Net1 is making use of CPS’s privileged position as social grant paymaster to give its sister companies first bite and privileged access to a vast potential client base.

Secondly, it raises an issue that’s often forgotten in sweeping generalisations about the need to cover the “unbanked” with financial services. Yes, poor people need access to banking services, and may benefit from smart cards and electronic banking. But these services should be designed with their interests in mind.

Deborah James and Dinah Rajak have shown how in South Africa the history of “credit apartheid” and paternalistic control over poor people’s finance has created a situation where creditors wield disproportionate power. Unbridled financial inclusion of the poor may amount to adverse incorporation into a financial sector geared towards preying on them. Already, the Black Sash has collected evidence of troubling instances of unauthorised and unlawful deductions from accounts set up for grant recipients, often with very little recourse.

This is why the social grants crisis has implications beyond the distribution of payments. Sassa has missed a major opportunity to ensure that financial inclusion happens in a beneficial, “pro-poor” way. It failed to follow the Constitutional Court’s order that the payment of social grants should be done in a way that protects the rights, interests, and confidential data of grant beneficiaries. Instead, it has created a situation in which CPS and Net1 hold all the cards. At present, the Constitutional Court and Treasury have almost no leverage to prevent their service provider from simply walking away on 1 April 2017.

Already, Net1 CEO Serge Belamant has made it clear that he is not interested in extending the contract on its present terms. He is in a position to ask for whatever he wants – including provisions that lock claimants even more tightly into his empire.

Sassa’s inactivity has created the worst possible outcome, not only in the short but also in the long term. A crisis over grant distribution looms, and the opportunity to provide meaningful financial inclusion has been missed.

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Aside

Qumi Homes is pleased to announce that Ms Jeanette van der Merwe has been appointed as the new CEO with effect from 1 March 2017.

Ms Linda Krause (right) gives her name tag to Ms Jeanette van der Merwe (left) in a symbolic handover of the reins yesterday.

Ms van der Merwe will be taking over the reins from Ms Linda Krause, outgoing CEO and founding member of Qumi Homes, who will be retiring at the end of February 2017 after 9 years at the helm.

“This will make for a very smooth transfer.” – Linda Krause

Ms van der Merwe started as a volunteer worker with Qumi Homes fron June 2008 to November 2011. She then “retired” for 3 years after which she was appointed in her current position as Logistics Manager in January 2014.

A total of ninety-one (94+) and not thirty-six (36) mentally ill patients (as initially and commonly reported publicly in the media) died between the 23rd March 2016 and 19th December 2016 in Gauteng Province.

All the 27 NGOs to which patients were transferred operated under invalid licenses.

All patients who died in these NGOs died under unlawful circumstances.

On the date, 13th September 2016, when the MEC made the public announcement of 36 deaths, 77 patients had already died.

Between May and September 2016, 77 MCHUs died.

The OHSC inspectors and Ombud identified and confirmed 73 deaths, while the Ministerial Advisory Committee on Mental Health identified and confirmed 66 deaths during the course of their investigations.

At the time of writing the Report, 94 patients had died in 16 out of 27 Non-Governmental Organisations (NGOs) and 3 hospitals.

There were 11 NGOs with no deaths, 8 NGOs with average deaths and 8 NGOs with ‘higher or excess’ death.

Only 4 MCHUs died in hospitals compared to 77 MCHUs deaths at NGOs; in absolute numbers for every 1 death at the hospitals there were 19 deaths at the NGOs but correcting for the total base population the ratio is 1:7. This ratio is very high. This finding is consistent with the interpretation that the problem was in the NGOs.

1% Deaths occurred at the NGOs from those MCHUs directly transferred from Life Healthcare Esidimeni (LE).

81 deaths were LE-associated while 13 deaths were not.

The Gauteng Directorate of Mental Health (GDMH) could only identify 48 deaths. These differing numbers are symptomatic and pathognomonic of an institution with poor data integrity (lack of accuracy and lack of consistency) and the lack of reliable and quality information systems found during the investigation.

2. Available evidence by the Expert Panel and the Ombud showed that a ‘high-level decision’ to terminate the LE contract precipitously was taken, followed by a ‘programme of action’ with disastrous outcomes/ consequences including the deaths of Assisted MCHUs. Evidence identified three key players in the project: MEC Qedani Dorothy Mahlangu, Head of Department (HoD) Dr. Tiego Ephraim Selebano and Director Dr. Makgabo Manamela. Their fingerprints are ‘peppered’ throughout the project.

The decision was unwise and flawed, with inadequate planning and a ‘chaotic’ and ‘rushed or hurried’ implementation process.

The decision to terminate the contract precipitously contradicted the National Mental Health Policy Framework and Strategy, the cost rationale could not be justified above the rights of the mentally ill patients to dignity and the state’s constitutional obligation to accessible health care. This precipitous approach was not supported by available research experience or legislative prescripts.

The project has brought ‘pain and anguish’ to many families, it has also brought national and international disrepute and embarrassment to South Africa, particularly its Health System Annexure 1a-b (UN Expert Report).

Several factors in the ‘programme of action’ were identified independently by Expert Panel, OHSC Inspectors, Ombud and MAC that contributed and precipitated to the accelerated deaths of mentally ill patients at NGOs. The transfer process particularly, was often described as ‘chaotic or a total shamble’.

3 The Gauteng Mental Health Marathon Project (GMMP) , as it became known was: done in a ‘hurry/ rush’; with ‘chaotic’ execution; in an environment with no developed, no tradition, no culture of primary mental health care community-based services framework and infrastructure.

This 2013-2020 policy framework and strategic plan were selectively interpreted, misrepresented and contravened in this project to drive the overall universally-accepted objective of deinstitutionalisation, the core of the Mental Health Care Act, (MHCA), 2002 (Act No. 17 of 2002).

The policy and the strategy are clear. ‘Deinstitutionalisation of patients must be done systematically and with adequate provision made for community services’. Evidence in this report did not find that this was the case in this project.

Mentally ill patients were transferred ‘rapidly and in large numbers with a short timeframe’ from the ‘structured and non-stop caring environment’ of LE into an ‘unstructured, unpredictable, sub-standard caring environment’ of the NGOs; this decision was not only negligent and a violation of the rights of the mentally ill patients but also goes totally against the principle of health, i.e. the preservation of life and not the opposite.

The transfer project occurred against widespread professional, expert and civil society stakeholders’ warnings and advice; these advice and warnings have sadly come true.

Newly-established NGOs were mysteriously and poorly selected, poorly prepared, ‘not ready’, their staff was not trained, not qualified and was unable to distinguish between the highly specialized non-stop professional care requirements of ‘assisted’ Mental Health Care User (MCHU) from LE and a business opportunity; there were often mismatches between MCHU functionality with NGO fitness for purpose.

Patients were transferred to far away places from their homes and their communities, at times without the knowledge of the families, often bringing additional financial burden and stress on the family.

Some patients were transferred into overcrowded facilities which are more restrictive and contrary to the policy of the deinstitutionalisation.

Transferring mentally ill patients to unfamiliar unstructured environments and to too far away, NGOs defeated and rendered the concept and purpose of mental health community services null and void.

Some MCHUs ended up in NGOs not originally selected, others were transported to several NGOs; these further exacerbated anxieties and added instability on the mentally ill patience.

4.The NGOs where the majority of patients died had neither the basic competence and experience, the leadership/managerial capacity nor ‘fitness for purpose’ and were often poorly resourced. The existent unsuitable conditions and competence in some of these NGOs precipitated and are closely linked to the observed ‘higher or excess’ deaths of the mentally ill patients. These NGOS were not only unsuitable to care for the high specialised non-stop needs of the ‘assisted’ MCHUs they received but were also not adequately prepared for the task.

This project demonstrated clearly that basic professional care skills for community mental health care, cannot be acquired through seminars or workshops but through professional education, training and qualifications.

5 Human Rights Violations There is prima facie evidence, that certain officials and certain NGOs and some activities within the Gauteng Marathon Project violated the Constitution and contravened, the National Health Act (NHA), (Act No. 61 of 2003) and the Mental Health Care Act (MHC), (Act No. 17 of 2002). Some executions and implementation of the project have shown a total disregard of the rights of the patients and their families, including but not limited to the Right to Human dignity; Right to life; Right to freedom and security of person; Right to privacy, Right to protection from an environment that is not harmful to their health or well-being, Right to access to quality health care services, sufficient food and water and Right to an administrative action that is lawful, reasonable and procedurally fair. Some patients were transferred directly from ‘sick bays’ to NGOs; others were transferred with co-morbid medical conditions that required highly specialized medical care (‘bedsores and puss oozing out of sores’ or medical conditions such as epilepsy and hypertension) into NGOs where such care was not available, and yet other frail, disabled and incapacitated patients were transported in inappropriate and inhumane modes of transport, some ‘without wheel chairs but tied with bed sheets’ to support them; some NGOs rocked up at LE in open ‘bakkies’ to fetch MCHUs while others chose MCHUs like an ‘auction cattle market’ despite pre-selection by the GDMH staff; some MCHUs were shuttled around several NGOs; during transfer and after deaths several relatives of patients were still not notified or communicated to timeously; some are still looking for relatives; these conducts were most negligent and reckless and showed a total lack of respect for human dignity, care and human life.

6 A combination of 1.2, 1.3, 1.4, 1.5 above contributed to the different pattern of deaths and to more deaths experienced in some NGOs.

The Premier of the Gauteng Province must, in the light of the findings in this Report, consider the suitability of MEC Qedani Dorothy Mahlangu to continue in her current role as MEC for Health.